Divorce
Court in the act
May 27th 2004
From The Economist print edition
England's a bad place for rich people with wobbly marriages. It may get worse
HERR X was a rich man before he married his English wife, and when he moved to London with her some years later, he got a nasty shock. She filed for divorce—and whereas in Germany that means sharing out only the assets accumulated during the marriage, in England, everything is potentially up for grabs. Facing ruin, Herr X moved fast, apologising convincingly for his infidelity. His wife withdrew the divorce petition. The couple then moved back to Germany—where Herr X then filed for divorce again, but this time under rules that saved his fortune.
Globalised lifestyles create plenty of scope for this sort of regulatory arbitrage. Germany and most continental countries ring-fence pre-marital property. England usually tosses it all in the pot. English judges can wholly ignore pre-nuptial agreements; elsewhere they can be binding. In France and other Mediterranean countries fault plays a role: infidelity can mean losing out financially. But in northern European countries, conduct short of the mad or murderous is excluded. Judges in England now look very kindly on wives' needs, especially after long marriages during which their earning power may have been eroded. In most of Europe long-term maintenance is very rare; women are expected to work just like men.
London is already the worst jurisdiction in Europe for rich spouses (see table). It may soon overtake America's fiercest: New York. Currently the cases of two couples—one husband rich from football, the other from accountancy—are being heard jointly by the Court of Appeal. In both cases the wives are arguing that a share of the assets is not enough: they want a fair slice of their husbands' future income.
That would chime with American thinking. The wife who scrubs floors to put her man through law school deserves a share of his future legal earnings, argues Marjory Fields, a retired New York judge who is now a consultant with a London law firm. New York courts calculate the present value of a high-flying spouse's future earnings and add it to other assets similarly built up during the marriage. That total is then split, either with a one-off payment or by instalments.
Many English lawyers support this, noting that capital and income are two sides of the same coin. It is “ludicrous”, according to John Cornwell, a top London divorce lawyer, that the law pays so little attention to future income. “You could find the assets are divided 50-50 but the disparity is huge because the wife will be living on investment income only and the husband is on £500,000 a year,” he says.
If the appeal court judges rule along those lines, it will complete England's journey to the top of the league table of generous (for the poorer partner) divorce locations. In the past, it was at the bottom: judges worked on the basis of the “reasonable needs” of the poorer half (in practice, usually the wife). That has already shifted, in a landmark case in October 2000, to the idea of an “equal division” of property—and now, maybe, of income too.
Discontented spouses in mobile marriages are quick to pick up these trends. As English judges became more wife-friendly, rich Americans stopped coming to London to dump their spouses. Women married to Arabs have started coming for just the same reason, notes Pauline Fowler, a partner in a specialist London firm. For most husbands, continental Europe will offer a much better deal than England. “If I have a French client living in London with his beautiful wife, I tell him ‘if you have the chance, file in France immediately',” says Véronique Chauveau, a Paris-based international lawyer. Louise Spitz, a London lawyer, has seen “a significant increase” in international clients since October 2000 and predicts a further rise in future.
The European Union has tried to tidy things up with a measure known as Brussels II, in force since 2001. This says that six months' residence in any signatory country is enough to start divorce proceedings there; once launched, they can't happen anywhere else. That sounds admirable, but the effects have been mixed. Expensive jurisdictional disputes are fewer. But there's a big incentive to be the first to go to law, penalising trust and patience in a troubled marriage. “It's awful because parties issue sooner than they want,” says Kerstin Beyer, a German lawyer at a specialist London firm.
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